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© Gati, Atambo ISSN 2412-0294 1849

http://www.ijssit.com Vol III Issue II, May 2017

ISSN 2412-0294

EFFECTS OF REWARD SYSTEM ON EMPLOYEE PERFORMANCE IN PUBLIC

ORGANIZATIONS: A STUDY OF EMPLOYEE PERFORMANCE IN MIGORI

COUNTY, KENYA

1* Mwita Sheila Gati

Jomo Kenyatta University of Agriculture and Technology

[email protected]

2** Dr. Wallace Atambo

Jomo Kenyatta University of Agriculture and Technology

[email protected]

Abstract

Employee’s performance is the centre point of the organizational behavior. Extrinsic

behavioural contingencies are significant elements to motivate behaviour. Additionally, each

motivation type (extrinsic and intrinsic) has its exclusive system and when both meet, there is

conflict which is based on statement that extrinsic (tangible) rewards have a negative influence

on intrinsic rewarding criteria, a situation that creates a paradox on reward systems and

employee performance. Regression model results for the relationship between reward systems

and permanence of employees in the county governments indicated that employee performance is

a function of reward systems adopted in the county government; substituting the coefficients in

the equation resulted in EP= 0.317+ 0.286PTO+ 0.086 REoY +0.289PoE - 0.064 IEB -0.031

FPR showing that employee performance was positively influenced by the use of professional

training in the public sector; this influenced unit change in employee performance by a

magnitude of 0.286 when used on employees, while recognition of employees of the year

contribute to performance by 0.086 magnitude. For promotion of employees it influences

employee performance by 0.289 magnitudes. Only increases in employee benefits and formal

public recognition reward systems have negative contribution towards employee performance in

the county government. The information further showed that reward systems had a strong

association with employee performance(R = 0.916a), further the rewards systems could explain

upto 83.8% of the variation in employee performance and this was indicated by R Square ( R =

0.838) the model used in this study can be relied on by its users upto 83.7% (its adjusted R2 =

.837) and this result was statistically significant (P<0.005). The study recommends that

organizations to adopt reward systems for improving employee performance.

Keywords: employee performance, public organisations, reward systems

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mailto:[email protected]


INTRODUCTION

In the real world, it is very important to reward high performance levels because this motivates

and controls the performance. Reward strategies confirm the level and the merge of non-financial

and financial rewards required to attract, maintain and inspire skilful competent and capable

employees to make the organization prosperous. Although some of these benefits are financial

forms, such as options for salary sacrificing and competitive pay, there are a lot of non-financial

benefits which firms can provide its employees. They are, in fact, some factors that may motivate

the staff. Therefore it is necessary to know what really inspires employees and perhaps they are

not the same things that stimulate other employees. The obvious reward practice should be

carried out by the simplification of the connection between the given reward and the additional

effort (Porter et al., 1975). There also have been cautions about the rewards ways managed

within the reward system. Further to achieve positive motivational properties, the organizations

distribute incentive rewards to be performance-dependent. Indeed, organizational leaders attempt

to run a fair rewarding system to boost performance rather than those who reward in an unfair

manner. In this case, although the necessity of being fair in rewarding others seems to be

understood clearly from a theoretical view, bias in the performance evaluations has often been

reported in different economic studies (Prendergast, 1999). Thus, clear fairness is needed to

manage an optimistic association with the reward victory in an organization. The controllability

concept is defined as the amount of the employee’s capability to influence on or control the

outcome (Baker, 2002).

Reward management is one of the strategies used by Human Resource Managers for attracting

and retaining suitable employees as well as facilitating them to improve their performance

through motivation and to comply with employment legislation and regulation. As a result HR

managers seek to design reward structures that facilitate the organizations strategic goals and the

goals of individual employees. We all believe that reward systems are very crucial for an

organization. Rewards include systems, programs and practices that influence the actions of

people. The purpose of reward systems is to provide a systematic way to deliver positive

consequences. Fundamental purpose is to provide positive consequences for contributions to

desired performance (Wilson, 2003). The only way employees will fulfill the employers dream is

to share in their dream. Reward systems are the mechanisms that make this happen. They can

include awards and other forms of recognition, promotions, reassignments, monetary bonuses

and others like vacations or private medical cover. When employees are rewarded, they get work

done. Employers get more of the behavior they reward, not what they assume they will

automatically get from employees. Thus when employees surpass their target or exceed their

standard they should be rewarded immediately as a way of motivating them. By doing this,

employees directly connect the reward with behavior and higher performance they have attained.

Effective reward systems should always focus on the positive reinforcement and raising

employee morale. Migori county government as an employer is obligated to provide free medical

treatment, training, house allowance and basic salary to all its employees. The interest of the


study is to try finding out and studying the relationship between different rewards given to

employees and the effect it has on output (service delivery).

The reward system in the public sector has over the years, encouraged disparities in rewards to

employees within the departments in Migori -County and therefore leading to general

dissatisfaction by employees. The coming into existence of Migori county government was as a

result of the promulgation of the new constitution 2010 which advocated for a devolved system

of government. Migori County government is among the 47 counties formed as a result of

devolved system of governance.

The county government has two arms, the legislative arm and executive arm. The executive arm

is composed of the Governor, the deputy governor, executive committee members and all civil

servants, (The Constitution of Kenya) 2010. The county government in the process of creating a

structure decided under the leadership of the governor to have 10 ministries headed by the

ECM’s as guided by the constitution with intention to manage the 10 functions devolved to

counties (Schedule Four Part 2 of the Constitution of Kenya, 2010). Public service being one of

the functions created to ensure service delivery to citizens picked it constitutional mandate well

by setting up structures that will ensure the goals of devolution are achieved. New offices have

been created some have been abolished. After creating structures the ministry of public service

has embarked on bringing changes to the organization. One of the proposed tools picked was the

introduction of performance contract, whereby all the stakeholders were engaged in preparing

the document then vetting and negotiation took place to pave way for implementation of the tool.

It’s two years down the line and the management feels nothing much has been achieved. The

management therefore decided to sit down and find out why employees were not able to achieve

organization objectives, what came out as a quick measure was to introduce reward management

to motivate employees.

STATEMENT OF THE PROBLEM

Properly measuring performance ensures that a reward program pays off in terms of business

goals since rewards have a real cost in terms of time and money. Despite vast empirical literature

on reward systems the main issues like the degree of employee performance difference based on

either intrinsic or extrinsic rewards remains unclear. In view of the existing scenario, it was

therefore necessary to establish effects of reward systems on employee performance specifically

in Migori County Kenya.

STUDY OBJECTIVES

The study was guided by the following specific objectives:

i. To determine the effect of professional training reward system on employee performance

in Migori County Kenya.


ii. To establish the effect of recognizing employee of the year reward system on employee

performance in Migori County Kenya.

iii. To find out the effect of promotion reward system on employee performance in Migori

County Kenya.

iv. To establish the effect of increase of employee benefits reward system on employee


v. To determine the effect of formal public recognition reward system on employee


LITERATURE REVIEW

The study was guided theory X and theory Y, hierarchy of needs theory and equity theory.

Conceptual Framework

In conducting the study, a conceptual framework was developed to show the relationship

between the independent variables and the dependent variable as illustrated in the figure below.

Independent variables Dependent variables

Fig 1: Conceptual Framework

RESEARCH METHODOLOGY

This study adopted used of descriptive case study research design. The study target population

was 1890 respondents who are employees from the devolved functions in Migori county

government, Kenya. The sample size was 734 respondents selected using stratified random

sampling technique. A questionnaire was used to collect primary data from the respondents.

Quantitative data analysis was done using descriptive statistics and inferential statistics.

Recognizing Employee of the

Year

Promotion of Employees

Increase of Employee Benefits

Formal Public Recognition

Employee Performance

- Level of service

delivery

Professional Training

Opportunities


Descriptive statistics involved the use of percentages and means, determination of coefficient of

multiple correlations and regression equations to establish the relationship between the reward

system’s practices and the performance of employees in Migori County.

DATA ANALYSIS AND PRESENTATION

Reward Systems and motivation in the County Governments

The study sought to establish whether the county governments use reward systems to motivate

employees in their quest to provide public services. The information obtained from the field was

presented as in table 1.

Table 1 Reward Systems and motivation in the County Governments

Reward System Yes No

Freq Percentage Freq. Percentage

Professional Training Reward System 503 68.5% 231 31.5%

Recognition of Employees Reward System 476 64.85% 258 35.15%

Promotion Reward System 318 43.33% 416 56.67%

Employee Benefits Reward System 274 37.33% 460 62.67%

Formal Public recognition Reward System 348 47.41% 386 52.59%

Table 1 indicate that 68.5% of the total respondents who reacted to professional training reward

system revealed that the system was used to motivate employees while 31.5% of the respondents

felt that this reward system was not adopted and hence it had no influence on employee’s

performance. On the recognition of employees reward system 64.85% of the total respondents

expressed that it is adopted and it influences employee’s service delivery to the general public

while 35.15% of the respondents reacted with a negative (no) response indicating that it is not

used and has no effect on employee performance in the county governments. For promotion

reward systems majority of the respondents expressed negatively by saying no at 56.67%

response rate, indicating that this type of reward system is not used in the county government to

motivate employees in the provision of public services. Further on the employee benefits reward

system the respondents expressed that it is not in use, 62.67% of the respondents reacted

negatively by saying no to confirm it not used in the county governments to motivate employees

in the provision of public services; while 52.59% of the total respondents reacted to formal

public recognition reward system as not used to motivate employees in the county government in

the quest to provide public services.

Bevan (2013) suggests that in excess of 60 percent of UK employees used non-financial

recognition in motivating its employees. There is a public belief and civil responsibility that an


employee is motivated when his efforts are recognized and appreciated, a sense of fairness and

equity practiced, personal improvement or a sense of respect and status related to one’s position

(UNDP, 2015). According to (Armstrong, and Murlis 2013), in their study on reward

management, non-financial appreciation can be very motivating, helping to build feelings of

confidence and satisfaction among employees.

Reward Systems and Employee Performance

The study sought to establish the extent to which reward systems influence the motivation of

employees in Migori County in relation to the provision of public services. The respondents were

asked to rate their opinions on a 5 point Likert scale from 5.0 most influential, 4.0 more

influential, 3.0 moderately influential, 2.0 less influential and 1.0 not influential of the level of

employee motivation which translates to performance. The responses obtained from the field

were presented as in table 2 below

Table 2 Reward Systems and Employee Performance

Reward System 5 4 3 2 1 fi wifi wfi/fi

Professional Training Reward

System

342 103 197 68 24 734 2873 3.914

Recognition of Employees

Reward System

7 48 510 78 91 734 2004 2.7302

Promotion Reward System 438 206 61 10 19 734 3236 4.409

Employee Benefits Reward

System

411 239 68 10 6 734 3241 4.416

Formal Public recognition

Reward System

54 68 307 294 11 734 2062 2.809

Table 2 indicate that professional training reward system influenced employee performance to a

moderate extent as the respondents rated it at 3.914 weighted magnitude. Recognition of

employees as a reward system was rated to influence employee performance to a less extent at

2.7302 weighted magnitudes by the respondents. Majority of the respondents felt that

promotion rewards system and employee benefits reward systems have more influence

employees performance as they were rated at 4.409 and 4.416 weighted magnitude respectively;

this indicate that employees recognize more what they gain from the employer and its relation to

their labour output. Finally for formal public recognition reward system the respondents rated it

at less influential with 2.809 weighted magnitudes.

Promotion systems affect almost all aspects of organizational lives. This is particularly evident

from studies of human resource management (Fuller and Huber, 1998) and internal labor markets


(Baker and Holmstrom, 1995; Barron and Loewenstein, 1985). Given the importance of

promotion systems in organizations, it is surprising that few studies have attempted to examine

the role of various environmental, organizational and job factors on the effectiveness of

promotion systems (Allen, 1997; Ferris et al., 1992). This study focused on promotion reward

systems to employees the results concurs with other scholars that promotion systems commonly

practiced in organizations including up-or-out systems, absolute merit-based systems, relative

merit-based systems, and seniority-based systems influence performance. The issue of employee

recognition is rooted in a sense of fairness; (Geller 1997) takes the positive reinforcement of

employee recognition with employee success. Success is a motivator and a much better teacher

than failure. Although motivational theory is far more complex and far less understood, it

appears that recognition plays a significant role in employee motivation and development and

this brings out employee performance in an organization.

Cost of Reward Systems and Employee Performance

The study established whether the county governments perform a tradeoff between costs of using

reward systems and expected performance of employees. The information obtained from the

field was presented as in table 4.5 below

Table 3 Cost of Reward Systems and Employee Performance

Response Frequency Percentage

Yes 407 55.45%

No 327 44.55%

Total 734 100%

The information in table 3 reveals that county governments perform a tradeoff between costs of

using rewards systems and the expected outcomes on employee’s performance. Majority of the

respondents 55.45% expressed that the method is applied while 44.55% felt that the method is

not applied in the county government system. In most cases the provision of public services has

no commercial obligation and therefore employee performance index is not clearly defined when

compared with private sector which has a commercial obligation.

Regression model Results

The model summary for the relationship between reward systems and permanence of employees

in the county governments was as below.


Table 4 Correlations Matrix of the Variables

EP REoY PoE IEB FPR PTO

Pearson Correlation EP 1.000

REoY .767 1.000

PoE .892 .801 1.000

IEB .875 .789 .955 1.000

FPR .666 .683 .675 .706 1.000

PTO .897 .776 .918 .933 .766 1.000

Table 5 Coefficients of the Reward systems and Employee Performance

Model

Unstandardized

Coefficients

Standardized

Coefficients

t Sig.

Collinearity

Statistics

B Std. Error Beta

Toleranc

e VIF

1 (Constant) .317 .072 4.395 .000

REoY .086 .021 .109 4.151 .000 .321 3.115

PoE .289 .037 .420 7.736 .000 .075 13.296

IEB -.064 .045 -.081 -1.418 .157 .067 14.876

FPR -.031 .016 -.047 -1.918 .056 .377 2.652

PTO .286 .025 .538 11.33

8

.000 .099 10.124

a. Dependent Variable: Employee performance

The model adopted in this study indicated that employee performance is a function of reward

systems adopted in the county government.

EP = ƒ (β0, PTO, REoY, PoE, IEB, FPR,μ) .................................................................... (4.1)

EP= β0+ β1PTO+ β2 REoY + β3PoE + β4 IEB + β5FPR+ μ.............................................. (4.2)

Where: EP – is Employee Performance

PTO- Professional Training Opportunities


REoY- Recognizing Employee of the Year

PoE- Promotion of Employees

IEB- Increase of Employee Benefits

FPR- Formal Public Recognition

β0, β, β2, β3, β4 and β5 are regression equation coefficients

μ - Error (disturbance term)

Substituting the coefficients in the equation results in the equation results in

EP= 0.317+ 0.286PTO+ 0.086 REoY +0.289PoE - 0.064 IEB -0.031 FPR

Employee performance is positively influenced by the use of professional training in the public

sector; this influences unit change in employee performance by a magnitude of 0.286 when used

on employees. While recognition of employees of the year contribute to performance by 0.086

magnitude. For promotion of employees it influences employee performance by 0.289

magnitude. Only increases in employee benefits and formal public recognition reward systems

have negative contribution towards employee performance in the county government.

Table 6 Model Summary of the Reward systems and Employee Performance

Model R R Square

Adjusted R

Square

Change Statistics

Durbin-

Watson

F

Change df1 df2

Sig. F

Change

1 .916a .838 .837 755.054 5 728 .000 .057

a. Predictors: (Constant), PTO, FPR, REoY, PoE, IEB

b. Dependent Variable: Employee performance

The information in table 6 show that reward systems have a strong association with employee

performance(R = 0.916a), further the rewards systems can explain upto 83.8% of the variation in

employee performance and this is indicated by R Square (R = 0.838) the model used in this study

can be relied on by its users upto 83.7% (adjusted R2 = .837) and this result is statistically

significant.


SUMMARY OF FINDINGS

The study established that male gender formed a larger percentage (71.66%) of respondents

while 28.34% of the respondents were of female gender. In social science studies gender

structure is important in the analysis to capture sociological views and organization of society.

The study established that majority of the respondents in this study hold certificate level of

education at 29.02%; diploma level of education the response rate was 20.30% secondary

education formed 19.21% while the degree level formed 14.58% and masters (post graduate

education level ) formed 16.89% response rate. The level of education of respondents is a study

is important for it defines the social structure of the respondents and the type of skills required in

an organization in relation to service delivery. For the public sector the lower cadre of

employee’s requirements for their job description is basic education. That explains why in the

county government’s majority of the respondents are certificate level of education and diploma

who are serving various capacities in the county government’s structure.

The study found that 68.5% of the total respondents who reacted to professional training reward

system revealed that the system was used to motivate employees while 31.5% of the respondents

felt that this reward system was not adopted and hence it had no influence on employee’s

performance. On the recognition of employees reward system 64.85% of the total respondents

expressed that it is adopted and it influences employee’s service delivery to the general public

while 35.15% of the respondents reacted with a negative (no) response indicating that it is not

used and has no effect on employee performance in the county governments. For promotion

reward systems majority of the respondents expressed negatively by saying no at 56.67%

response rate, indicating that this type of reward system is not used in the county government to

motivate employees in the provision of public services. Further on the employee benefits reward

system the respondents expressed that it is not in use, 62.67% of the respondents reacted

negatively by saying no to confirm it not used in the county governments to motivate employees

in the provision of public services; while 52.59% of the total respondents reacted to formal

public recognition reward system as not used to motivate employees in the county government in

the quest to provide public services.

Further the study found that professional training reward system influenced employee

performance to a moderate extent as the respondents rated it at 3.914 weighted magnitude.

Recognition of employees as a reward system was rated to influence employee performance to a

less extent at 2.7302 weighted magnitudes by the respondents. Majority of the respondents felt

that promotion rewards system and employee benefits reward systems have more influence

employees performance as they were rated at 4.409 and 4.416 weighted magnitude respectively;

this indicate that employees recognize more what they gain from the employer and its relation to

their labour output. Finally for formal public recognition reward system the respondents rated it

at less influential with 2.809 weighted magnitudes.

The study established that county governments perform a tradeoff between costs of using

rewards systems and the expected outcomes on employee’s performance. Majority of the


respondents 55.45% expressed that the method is applied while 44.55% felt that the method is

not applied in the county government system. In most cases the provision of public services has

no commercial obligation and therefore employee performance index is not clearly defined when

compared with private sector which has a commercial obligation.

Regression model results for the relationship between reward systems and permanence of

employees in the county governments indicated that employee performance is a function of

reward systems adopted in the county government; substituting the coefficients in the equation

resulted in EP= 0.317+ 0.286PTO+ 0.086 REoY +0.289PoE - 0.064 IEB -0.031 FPR showing

that employee performance was positively influenced by the use of professional training in the

public sector; this influenced unit change in employee performance by a magnitude of 0.286

when used on employees. While recognition of employees of the year contribute to performance

by 0.086 magnitude. For promotion of employees it influences employee performance by 0.289

magnitudes. Only increases in employee benefits and formal public recognition reward systems

have negative contribution towards employee performance in the county government. The

information further showed that reward systems had a strong association with employee

performance(R = 0.916a), further the rewards systems could explain upto 83.8% of the variation

in employee performance and this was indicated by R Square ( R = 0.838) the model used in this

study can be relied on by its users upto 83.7% (its adjusted R2 = .837) and this result was

statistically significant (P<0.005).

CONCLUSION

Based on the findings the study concludes that rewards systems adopted in an organization

positively and significantly influence the performance of its employees. The management of

organizations should maximize the use of professional training as this influenced unit change in

employee performance by a magnitude of 0.286 when used on employees, while recognition of

employees of the year contribute to performance by 0.086 magnitude and promotion of

employees influenced employee performance by 0.289 magnitudes. Therefore their use in the

organization contributes to the overall performance of the organization.

Recommendations

Based on the findings and conclusion on the reward systems and employee performance

organizations including public organizations should use the professional training, recognition of

employees of the year and promotion of employees to improve on employee performance to

better service delivery to their customers.

Recommendation for further research

The target used in the research was only picked from Migori County Employees. Therefore the

finding may be generalized to the population of all counties in Kenya. Future research should try

to replicate the content study in all counties in Kenya before generalizing the findings.


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